Do carbon offsets reduce emissions?

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Some sincere environmentalists believe that markets in carbon offsets will slow climate change. In fact, as Chris Lang of REDD-Monitor explains, carbon offsets are at best a zero sum game.

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Some sincere environmentalists believe that markets in carbon offsets will slow climate change. In fact, as Chris Lang of REDD-Monitor explains, carbon offsets are at best a zero sum game. 

by Chris Lang
REDD Monitor 

There is an equation to illustrate that carbon offsets do not reduce emissions: 1 – 1 = 0. Most people can understand this. If emissions are reduced in one place (-1) but through the sales of carbon credits emissions are allowed to continue somewhere else (+1) the overall result is zero. Unfortunately, IDEAcarbon does not understand this.

IDEAcarbon presents itself as a serious company. “We are at the cutting-edge of policy and market intelligence,” states the company’s website. IDEAcarbon was founded in 2007, by Shandi Modi (an economist) and Ian Johnson (former Vice President of the World Bank). Lord Nicolas Stern took part in the launch of the company. Stern is vice-president of IDEAcarbon’s parent company, IDEAglobal, and he’s on the advisory board of IDEAcarbon.

These are not carbon cowboys, then. So REDD-Monitor was surprised last week when IDEAcarbon tweeted that, “By definition additional offsets do not allow pollution to continue.” The context was Dan Nepstad’s response to Greenpeace’s report about REDD offsets in Chiapas.

Of course this isn’t Nicolas Stern, Ian Johnson or Shandi Modi tweeting. But the same confusion is reflected on IDEAcarbon’s website, in this research note about financing REDD, for example:

“REDD+ is being presented to the private sector as an offsetting mechanism, a new financial market. This means that companies complying with domestic regulation of emissions can use the carbon saved by avoided deforestation to meet their targets rather than reduce emissions at home. It is therefore offered as a win-win opportunity: carbon emissions are reduced and money can be made.”

This is dreadfully confused. The second sentence seems to admit that there is no overall reduction – companies buy carbon credits “rather than reducing emissions at home”. The next sentence claims a “win-win opportunity” in which “emissions are reduced” and “money can be made”.

That offsets do not reduce emissions should not be a controversial point. Here are some proponents of carbon trading explaining that carbon trading does not reduce emissions:

  • Patrick Birley, the Chief Executive of the European Climate Exchange, November 2009: “It doesn’t reduce a single tonne of carbon going into the atmosphere. It’s got nothing to do with it. It’s all about the cap. The cap is the mechanism that produces a declining amount of carbon over the long term going into the atmosphere.”
  • Lex de Jonge, then-chair of the CDM Executive Board, December 2009: “CDM, at its best, is a zero sum game, because its credits are used to offset reduction obligations of Annex 1 countries.”
  • Sudeep Kodialbail, Lead Assessor, Climate Change Programme at SGS, October 2011: “If you look at the UNFCCC website, it’s very interesting when you read it because they don’t use the word reduce, they use the word stabilise.”

On its website, IDEAcarbon explains that “We believe that climate change is a positive business opportunity.” Hence the “win-win opportunity” and the “money can be made” attitude. But IDEAcarbon also claims to be, “open, honest and transparent”. Given the company’s statements on carbon offsets as a reduction of emissions, this is simply not true.

As the twitter discussion continued, IDEAcarbon changed its argument slightly. Instead of arguing that offsets reduce emissions, the argument for supporting offsets shifted to the argument that offsets “enable a higher overall level of ambition” in emissions reduction targets. (This is the same point that Christiana Figueres makes – Figueres was also an advisor of IDEAcarbon before she took up her current job as UNFCCC’s Executive Secretary.) I asked for evidence backing this claim of higher ambition. So far, IDEAcarbon’s only response is “the Australian ETS. It wouldn’t happen at all without offsets.”

Whether or not it would have happened without offsets is practically impossible to say, but the targets are certainly not ambitious in the short term: 5% below 2000 levels by 2020. The longer term target is better (a further 80% by 2050) but the nature of climate change is that the more we reduce immediately, the better. Offsets will of course only weaken these targets by allowing companies to buy carbon credits rather than reducing polluting emissions. And there are serious doubts that linking the EU carbon market by 2018 will succeed in reducing Australia’s emissions – especially if plans for nine new “mega mines” go ahead in Queensland.

But if there were any truth in the myth that offsets encourage governments to set more ambitious emissions reduction targets, then the UN climate negotiations would not be in a stalemate.

More to the point, after the sale of one billion CDM credits, shouldn’t we be starting to see some reduction in concentrations of CO2 in the atmosphere? Or at least a reduction in the speed at which CO2 in the atmosphere is increasing. If not, how many carbon credits need to be sold before CO2 concentrations might start to reduce?

As the graphs below show, sales of CDM credits are increasing steadily, as is the concentration of CO2 in the atmosphere. The only thing decreasing is the price of carbon credits.